No cost approach needed

[Ross (CO)]

Help us (me) out a bit here. A new "version" as of Nov. 1st '05 ?.....of what ? Do you mean the 13 FAQ's that were answered by FNMA on that date ? To my knowledge the formal Selling Guide has not seen any announcement for being new or extensively revised to compliment the whoopdy-doo and the nuances of the new forms. Will one find today a new text wording of the XI:407 section that clarifes this and offer a date on such a statement ? Lee, what referenced memo can you share ?

The Q #12 answer Mr. Santora shares may well have a second paragraph. I tried to find those pages in my stack-of-stuff before posting here, but do not know where those are. I have inserted segments of the supportive and helpful Q #12 answer in all my reports ever since Nov. 1st of '05. No client has ever choked and sputtered since then.

And, yes, we all know the client requests to be for the satisfaction of an insurance-related intended use. What is deplorable is the arrogance and total unwillingness for the client to explain the reason for some of those asinine requests......even when the appraiser has totally valid reasons for why that approach is a true waste of time and effort, and the results justifiably lack substance.......like when the last vacant lot sale happened when LBJ was President and there has been no new construction of like kind to the subject in that immediate neighborhood, subdivision or encircled market area for all these decades.

Yo, Mr. Client, why don't you just phone the hazard insurance agent for this deal and get him/her to get you the insurance-based data that you need to have !

 

[timd354]

Timd,

Thanks for bringing this up. I was thinking about the 06/30/02 version of XI:407 and should not have been. You are correct, that section regarding the appraiser must provide an opinion of value for the site was removed from the 11/01/05 version of XI,407. Something we all should be darn glad of.

Webbed.

Mr. Duck,

Thanks for responding.....that's what I thought, but I was afraid that I may have missed something...especially since your knowledge of the guidelines is usually spot on.

 

[Tucson Appraisals]

Do the right thing!

Let's see:

1 hour phone time trying to not do the cost approach (with the possibility of loss of work for being uncooperative) vs. 30 min to complete cost approach with a "not for insurance purposes" comment.

Doesn't sound like a difficult decision.

Edward:

I think doing what is the easiest route to making people happy isn't aways the best decision, after all...isn't that why we are in this mess to begin with?

This is not about whether he should do it based on what is easier and what makes everyone get along....this decision should be based on if the approach can be relavent and credible! Doesn't sound like he agreed to do the cost approach from the onset of the assignment.

Question 1: Can you do a credible cost approach? If the answer is no, then do NOT do the cost approach.

Question 2: Is the approach relavent? If no, do not do the approach.

Bottom line: I support you in doing the right thing!

-Aaron

 

[George Hatch]

As others have said, the odds are that this probably is an insurable value use. If so, there's no reaon for an appraiser to be concerned about running into credibility issues by including it in their report, unless they have gotten themselves into an assignment for which they are incompetent to complete.

The cost approach to insurable value is not the same thing as cost approach to market value. As long as you make that clear in your reports then, from a standards perspective, it's all good.

Of course, if this is really about the fee then that's a different subject altogether.

 

[Fred]

Ross,
You are right there was another paragraph, and it answers your question about why the bank doesn't get replacement cost from the insurance company.

Fannie Mae requires property insurance for first mortgages that protects against loss or damage from fire and other hazards. The hazard insurance coverage should provide for claims to be settled on a replacement cost basis. We prefer lenders to rely on a replacement cost estimate for the property that is made by the insurer. However, we are generally hearing from insurers that although they may provide some guidance about what the replacement cost should be, they consider it to be the responsibility of the consumer to determine their level of coverage. The fact that insurers appear to be reluctant to determine the replacement cost for a dwelling has become even more significant due to the general lack of guaranteed replacement cost policy endorsements. In addition, some states prohibit lenders from requiring levels of hazard insurance that exceeds replacement cost for the property.​

 

[Ross (CO)]

Thank you, Steven, for posting that second paragraph here. It's text includes some very poignant lines that ought to be reflected back upon one's client.....just to create that record of such in one's report and take that small chimp off the appraiser's back since those are Fannie's own words that the appraiser is repeating. I re-state the content of the third sentence and the latter part of the fourth and mention that it my comments relate to Fannie's FAQ #12, dated Nov. 1st of 2005.

As to the relevance of the C.A. being included in one's report......and with that coming from a strict DEMAND by the client for it with NO avenue to discuss that "need" nor recognition of how reliable data to complete a credible approach might TRULY be lacking....this is always a ripe issue for further forum chat.

And, for this site value estimate thing.......Webbed, Lee, anybody have a text passage to share from Fannie that shows one does not have to offer a site value ? Are you guys on the advanced mailing list from Fannie as they released a new Selling Guide with a changed XI:407 ? After all, one would hate for the client to make a simple arithmetic calculation and subtract the site value estimate from the property value opinion we conclude.....and work with that residual amount. But, I'm sure they do that, anyway. So long as the homeowner--borrower--buyer is comfortable with that !

 

[Webbed Feet]

<...... snip.....>
And, for this site value estimate thing.......Webbed, Lee, anybody have a text passage to share from Fannie that shows one does not have to offer a site value ? Are you guys on the advanced mailing list from Fannie as they released a new Selling Guide with a changed XI:407 ? <.......snip.....>

Mr. Ross,

My prior post was only made based on the 11/2005 version of the XI; 407 section I found had removed the paragraph from the 06/2002 version that required a statement of land/site value if the CA was not completed.

If removal of that paragraph means Fannie has published that a site value opinion is no longer required is something I cannot verify for anyone. I feel some of the other people that have stated a site value opinion is no longer required need to step up to the plate and provide the publication from Fannie that specifically said that. Versus everyone just making an assumption that the removal of the paragraph that required the opinion of site value means it is no longer required.

Webbed.

P.S. I also want to say that the versions of the 2006 selling guide changes I found on-line still had the 06/30/2002 version of the XI,407 in them .... Then the versions of the 2007 selling guide changes I found on-line had the 11/01/2005 version of the XI, 407 in them. Something I personally found confusing as to how the 05/407 doesn't show up until in the 2007 selling guide changes.

 

[Fred]

If removal of that paragraph means Fannie has published that a site value opinion is no longer required is something I cannot verify for anyone. I feel some of the other people that have stated a site value opinion is no longer required need to step up to the plate and provide the publication from Fannie that specifically said that. Versus everyone just making an assumption that the removal of the paragraph that required the opinion of site value means it is no longer required.

It's right next to the statement that discounted cash flow isn't required. You want reference to a requirement that doesn't exist?

 

[Webbed Feet]

It's right next to the statement that discounted cash flow isn't required. You want reference to a requirement that doesn't exist?

Once an entity of authority puts out a demand in writing that something in particular must be completed and supplied, I rather DO think it is incumbent on that entity to clarify in writing when and if they decide to no longer require that item. Not just leave the entire world to assume they no longer require the item by default because the requirement disappeared out of a document for unknown reasons.

So yes, I expect a doumented reference about a requirement that certainly did exist with that reference clarifying that the past requirement is no longer required and the effective date of the change. That is called responsible communications to all involved.

Webbed.

 

[Zambendorf]

"Extreme" extra effort for insurnace valuation?

If filling out a valuation for insurance purposes is what the client wants, why not just generate estimate from MSB RCT? Its what the carrier wants anyway and it shouldn't more than a few minutes.